Tenants Ask to Void Settlement With Pinnacle Group Over Rents

By MIREYA NAVARRO

April 22, 2013

A major settlement between rent-regulated tenants and a large New York City landlord may be at risk after some of the tenants complained that they were not eligible for millions of dollars in compensation.

They have obtained new lawyers, who are seeking to renegotiate the settlement or, if new terms cannot be reached, go to trial. In court papers, the new lawyers said the agreement ends up barring most of the approximately 22,000 tenants in Pinnacle buildings who were represented in the class-action suit from receiving payment from the company for rent overcharges.

The appellants said Pinnacle was liable for much more than what it had agreed to pay.

“They were trying to get us to leave,” said Bernice Starr, an 81-year-old plaintiff who navigated the courthouse steps in Manhattan unsteadily with her walker to attend Monday’s oral arguments. She said the company refused to make repairs to her three-bedroom apartment in a building in Washington Heights.

From the outset, the original settlement, which was reached in 2011 and approved by a federal judge last year, drew mixed reactions from tenants, some of whom said they were unsure about who would be eligible.

The tenants sued the Pinnacle Group and its principal owner, Joel Wiener, in 2007, alleging that the company illegally inflated rents and “systematically” harassed tenants to force them to move so the company could charge higher rents.

While denying the charges, Pinnacle settled the case by agreeing to have a court-appointed administrator hear the tenants’ individual complaints and decide compensation.

The company also agreed to follow new procedures in carrying out rent increases and evictions in its buildings, as well as to pay $2.5 million to legal and tenant-rights groups to help the tenants make claims.

A group of tenants who had settled a lawsuit against the Pinnacle Group, a major New York City landlord, were back on Monday asking the United States Court of Appeals to overturn the settlement.

Suzanne DeChillo / The New York Times

But the new appeal, filed within weeks after the agreement was finalized last summer, has frozen the original settlement.

Pinnacle bought hundreds of apartment buildings in the mid-2000s and said it was trying to improve conditions in those that were deteriorating. But housing advocates claimed the company was among the private-equity firms that paid top dollar for rent-regulated buildings during the city’s housing boom and then showered tenants with eviction notices in order to charge higher rents.

In court documents, the tenants appealing the agreement said it allowed only tenants who rented their units from Pinnacle during a certain time period to recover illegal rent overcharges.

The agreement also excluded tenants who signed leases before Pinnacle bought the buildings, even if the company benefited from illegal rents set by previous owners and had a legal obligation to make sure its rents did not violate housing laws.

In all, the appellants argued, the settlement excluded 77 percent of all plaintiffs from getting compensation for rent overcharges.

A lawyer for Pinnacle, Mitchell Karlan, called the original agreement “fair and reasonable” and said of the appeal: “We expect that the settlement will be approved just as it was.”

Richard F. Levy was the lawyer who negotiated the original class-action settlement for the tenants. In an interview on Monday, he noted that fewer than 1 percent of the plaintiffs objected or opted out of the original deal.

In court documents, Mr. Levy said the exclusions were proper and hardly arbitrary — the claims either exceeded the statute of limitations for the case or were primarily based on the bad conduct of other landlords. He defended the agreement as providing benefits to all plaintiffs, beyond the rent refund issue.

“It is very sad,” he said of the appeal. “All they have done here is delay the relief for the 22,000 plaintiffs.”